Holistic
management for profitable growth in Professional Services Organizations
Professional
Services Organizations (PSOs) depend on the skills and experience of their
employees for providing a range of services to their clients. In order to
deliver on target margins, Practice Leaders at PSOs manage a few operational
levers viz. fees, compensation, structure, manager-to-staff ratio, utilization
etc. Making reactive adjustments to some of these levers with limited
operational visibility and inaccurate grasp of inter-dependencies could create
unintended long term effects. Instead, practice leaders must invest in timely
and distinctive expertise that attracts new clients and sets the firm apart in
the marketplace.
Observations:
· Boosting
utilization within an engagement and converting non-billable time into
billable time adds revenue and increases profitability
· More
precise management of individual staffing assignments helps to effectively
balance fees & compensation costs
· Drastically
lowering fees to win a competitive bid might get you locked to the low
rate structure for future engagements with that client
A PSO’s business
framework comprises of these key priorities:
Client
Acquisition & Relationship Management
Practice
leaders are concerned with better understanding their client portfolio and what
they can do to expand the profitable segments of their portfolio most
efficiently. To achieve company margin expectations, Practice Leaders need to
control rate discounting during client-negotiation, and manage employee
compensation expectations. For gaining new clients and cross-selling new
services to existing clients, they must identify opportunities and coordinate a
consistent, firm-wide approach to prioritization and pursuit.
Human Capital
Acquisition & Performance Management
PSOs
competency depends on their ability to attract, hire, retain, and motivate talented
professionals. Delivering on commitments and building the firm’s brand depend
on recruiting & assigning the right people to the right client service
engagements. They have to balance the needs of the firm (engagement
profitability) with the requirements of the individual (interesting work). Practice
and Operations Leaders need to constantly recalibrate expectations about who
will deliver services, and when & how the work will be done.
Contract
Execution & Service Delivery
Planning
and executing projects with phased milestones & deliverables is critical for
predictable, repeatable, and ultimately profitable delivery of an engagement. Practice leaders need to provision expertise
and knowledge across the entire organization in order to optimize service
delivery and drive operational consistency. They need to be responsive to each
client’s unique service requirements, and manage the quality & efficiency
within each project.
Financial Metrics
& Control
PSOs
need to focus on managing costs & maximizing the skills employed in client
engagements. Maintaining intense focus and absolute control over expenses is an
important condition for effective cost management. Financial executives need to
scrutinize projects in greater depth and identify profitability and cost by
client, project type, and project teams to better manage budgets & costs,
and shorten billing cycles.
Benefits of an
integrated software system
A
seamlessly integrated software system is needed to manage processes associated
with client relationship, sales & marketing, human resource engagement,
project management, time and expense reporting, billing, and financial
management. It helps Practice Leaders obtain an ‘apple-to-apple’ comparison of
data between business groups and insight across the functional groups.
Moreover, it helps practice managers effectively manage the human capital
supply chain viz. rapidly finding competent & available resources and
assigning them for the right assignment at the right time and place.
An integrated
approach for paving the path to growth & profitability
In
order to scale up to a higher business maturity and performance threshold, PSOs
need a holistic management approach that integrates all key areas and roles
within the organization. Practice Leaders need to find ways to breakdown the
silos and make it simpler to identify human capital assets that may be
leveraged to deliver services. In order to drive improvements in business
performance, leaders need to connect changes in client demand with competency
and capacity as well as address gaps in service delivery performance. By using
a holistic approach based on integrated processes - firm leadership can
optimize resource performance, streamline service operations, and fulfill
profitable growth objectives.
Future Trends
PSOs
face some long-term trends which will shape their future success and growth. They
need to have a thorough contextual insight on how to engage and pursue new
opportunities that arise due to changes in their client’s business model.
Additionally, they need to use a collaborative and adaptive operational process
for engaging a diverse talent pool that spans geographic distances.
Recommendations
· Attract
and capitalize on the best available talent; and balance utilization across
time zones & business units
· Foster
tighter communication & collaboration that help individuals work
smarter, optimize service execution, and catalyze innovation
· Provide
distinctive services to clients and cultivate trusted advisory relationships
to enable long-term repeat business
· Monitor
key performance metrics & identify risks before they become critical, and
take early corrective action
· Take
effective decisions and make differential investments for better ROI
· Maintain
a balanced scorecard on the firm’s forecasted v/s achieved goals in
key areas viz. client satisfaction, financial performance, process maturity, and
talent development
Closing note: The strength of a PSO’s competency
combined with a persistent commitment to deliver - is an unmatched value in today’s
demanding market place.
